The Fed Is Expected To Remain Patient 02-26-15

At least two more meetings until the Fed will begin raising rates, according to the two-day testimony Fed Chair Janet Yellen gave before Congress this week. If it does not sound like something new, it isn’t. The Fed had said that it would be patient in its rate-increase endeavor, and so the markets already anticipate that there would be no rate change until at least summer. Still, equities were mildly encouraged, and moved moderately higher, to reach new intraday highs, yesterday.

Fed officials have no fixed, pre-established schedule according to which they will impose policy changes. That means, as the economic signals remain mixed, analysts cannot determine the exact timeline for a rate increase simply by following the unemployment and inflation markers.
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The End of an Era Isn’t as Close As You Think 02-19-15

The U.S. Fed hasn’t raised interest rates since 2006. If it feels like forever, in economic terms it practically is. And considering the minutes of the most recent FOMC meeting released yesterday, we might find ourselves in the low-rate environment for yet longer.

As we learned from the minutes of the January FOMC meeting, economic data suggests no urgent reason to raise rates. The minutes detailed that more Federal Reserve officials leaned toward keeping rates at zero “for a longer time,” than those who wanted to accelerate the timeline. Read more about The End of an Era Isn’t as Close As You Think 02-19-15

Higher Stocks Despite Tepid Economic News 02-12-15

Retail sales fell in January by 0.8 percent thanks largely to the sharp 9.3 percent drop in prices at the gasoline pump; consumers spent less on gas. Excluding gas, though, sales were flat compared to a month-ago period. This also means that, while customers did save on their energy-related expenses, they did not yet divert their savings to make other purchases. Sales of autos declined, as did those of furniture, groceries, apparel, sporting goods and at department stores, the U.S. Department of Commerce reported. On the other hand, internet sales increased 0.5 percent, while restaurant sales grew by 0.8 percent.

This also marks the second consecutive decline in U.S. retail sales, after a  0.9 percent seasonally adjusted decline in December, according to Commerce.
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Growth Slows. Bad News—Or Not 02-05-15

The U.S. economy grew at an annualized rate of 2.6 percent in the fourth quarter of 2014—more slowly than expected, and considerably less than the 5 percent third quarter growth. Contributing factors—a weaker business investment, less government spending and a strong dollar that boosted the trade gap—all countered the largest gain in consumer spending in nine years.

Still, consumer spending, which accounts for nearly 70 percent of the U.S. economy, grew 4.3 percent. The cheapest gasoline prices since 2009 have given Americans more confidence—and more money—to spend, one factor that explains the big jump in auto sales last month, usually a slow time for the car industry.
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Reading the Fed’s Market Letter 01-29-15

With earnings season now at full throttle, disappointment over weaker-than-expected reports and guidance from several leading companies, has resulted in a market that just cannot get enough traction. Yesterday’s action also illustrates another factor that moves the market: the Fed. Stocks opened stronger, but, as the minutes of the latest FOMC meeting were released, they quickly erased their gains.

And this was despite the message of patience on future interest rate hikes given. Why? The statement language included significant changes in key places. The Fed acknowledged the U.S. economic growth, and called the pace of expansion “solid” (having replaced a word “moderate”). Since the FOMC’s interest rate decision is predicated, in part, on its assessment of the economy, the new adjective spooked some investors, who interpreted the language as a hawkish sign. Read more about Reading the Fed’s Market Letter 01-29-15